Mr. MOORHEAD. You know, everybody has been criticized so we shouldn't talk about that. That is not an area that is involved in what you are concerned about. It isn't affected in what we are talking about here.

Mr. WHEELER. We talk about exclusivity; exclusivity applies only in the top 50 markets today, so there is no such thing as a syndicated exclusivity law. It applies only in post-1972 systems, those built after 1972. As we said, they are grandfathered.

The other interesting thing is when you look at those who have asked for exclusivity protection, that is the way it works. It's not the independent television station that asks for it. It's the network station. It's not the little guy who says we were being portrayed this morning really being hurt by this, he is not asking for protection. It's the network who wants to maintain his hold on being the only voice in the market that is asking for the exclusivity protection.

Mr. MOORHEAD. Thank you very much.

Mr. WHEELER. Thank you very much.

Mr. KASTENMEIER. There was some interesting colloquy here about whether or not the changes in the rules were contemplated by the FCC under the law, under the copyright law, and the truth is, I think they were. An interesting corollary to that is what changes were contemplated concerning retransmission consent. Mr. SIMON. I certainly hope not.

Mr. KASTENMEIER. That is the whole point.

Mr. WHEELER. That is being advocated to the Commission also. NTIA has a petition in that they adopt retransmission consent as a part of this whole thing, so it cuts both ways.

Mr. SIMON. We would certainly seek reduction in the royalties after that.

Mr. KASTENMEIER. I yield to the gentleman from Michigan.

Mr. SAWYER. First, just a question I have heard asked and I am not clear on. How does a satellite power control who takes the signal off the satellite? Could a cable company or could a fellow put up its own antenna without waiting until the satelite owner receives the signal?

Mr. EFFROS. Yes; there could be theft of service. The answer from the satellite transmission point of view is that all of the satellite signals would be scrambled in the near future. There could be theft of service.

The way it has been policed up until now is that if the cable, well, to give you an example of WTBS, they have cost per inquiry advertising on their channel and then they get the lists back of who has ordered this paper cut. If somebody ordered the paper cut from Le Grand, Iowa, and according to their list somebody doesn't show up as somebody paying for their signal, they all of a sudden know that that signal is there.

It's a violation of the Communications Act and the Omnibus Crime Control and Safe Streets Act of 1968. It's the equivalent of wiretap, and very difficult to prosecute because you can have it in your back yard, on a farm, but that is a problem.

Mr. SAWYER. The other thing that has just bothered me here is that you referred to the intuitive rule or model. What I understand you are telling me is that, notwithstanding the fact that there are

say 3 stations operating in an area and you now bring in 12 more signals into that area, that there will be no diminution in the watching of the 3?

Mr. EFFROS. We say there is a point of diminishing returns. The first signal you bring in, people will watch it; but the question then becomes from a ratings point of view. Are the people watching that signal in preference over the signal they would have watched, or are they watching that signal whereas they would have normally had the set turned off, because they didn't like the program on the other three signals.

We don't know the answer yet. You bring in that first signal, and you will get x percentage of the audience viewing it. You bring in the second, and you get a little bit less; and you bring in the third, you get much less; and by the time you bring in the fourth, you have reached the point of diminishing returns.

Mr. SAWYER. If you now have 15 signals in a market that formerly had 3, there is no way I can logically see that there is not going to be a significant dropoff in the watching of any one signal. Mr. WHEELER. Mr. Sawyer, first of all, we don't really talk about 15 signals suddenly flooding into a market where there are 3. Mr. SAWYER. If you bring in on a cable thing you have 12. Mr. WHEELER. The point is in practicality, we are bringing in a couple of additional signals, what I was trying to say about superstations.

Mr. SIMON. We are bringing in other programing. For example, pay cable, which is really irrelevant to this whole thing, because we are paying full copyright for that, there are only one or two independent signals.

Mr. WHEELER. What the research to date shows, and I will specifically cite, one again is the FCC Economic Inquiry and the other is the Neilsen Study for Young and Rubican.

The studies found, the Neilsen study was a diary study in the home, what they found was that more people watched cable than watched normally, and so the number of eyeballs watching "MASH" on the local broadcast station is not changed.

The rating, the number of people watching is not changed. There are more people watching, because they have got other alternatives to watch, but those people have been attracted out of nonviewers, not stealing one from another and, therefore, if the rating is the same the value of the program is the same to the broadcaster, because he sells eyeballs to advertisers and the advertisers are reaching the same number of people.

If his value to advertisers is the same, then he ought to pay the same for the program, because he is using programing to generate advertising, so in essence what the study shows is that there is no impact on the number of people watching the channel, and in fact what happens is that there are new audiences attracted.

Ninety-seven percent of the homes in America have a television set, but one-third of the people do two-thirds of the watching, so we are appealing to the two-thirds who are not watching.

There is another corollary thing to that, and that is one of my favorate examples of one of the things that broadcasters always assume is that they are going to lay back and take it. When competition comes, it's competition, I just won't do anything. I

don't think they are dumb businessmen. What happened in Chattanooga is an example. It's a shift town with a lot of factory workers, and no station there went 24 hours a day. So the shift workers had no TV at night to watch.

They imported channel 17 out of Atlanta for the cable system there and 17 goes 24 hours a day. The local broadcasters, one of them responded by going 24 hours a day also, so what has happened is whereas the people of Chattanooga had no options and now they have two, and they are competing for it. That is the way it ought to be.

The people end up being the beneficiaries in that.

Mr. SAWYER. That is all I have.

Mr. KASTENMEIER. On that note we will conclude these hearings, and I would like to express on behalf of the subcommittee our thanks to the three panels who appeared here today.

Tomorrow I should announce that we will meet at 9:45 in this room also on related copyright matters concerning performance rights in sound recordings.

It may be that there will be some allusions to the cable problem tomorrow, but essentially they are devoted to the other subject of performance rates.

I want to say that I think this has been a very productive day. We have attempted to fully explore a good many facets of the problem. It's clear to everyone here that we could have a symposium; we could spend hours on the question, if not days, and there would be much more to say.

In any event, this becomes a question and issue for the subcommittee to cope with, and we may need to come to consult you further.

I want to thank the panels for appearing today.

This concludes today's hearing.

[Whereupon, at 3:30 p.m., the Subcommittee on Courts, Civil Liberties, and the Administration of Justice adjourned.]

COPYRIGHT ISSUES: PERFORMANCE RIGHTS IN

SOUND RECORDINGS

TUESDAY, NOVEMBER 27, 1979

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON COURTS, CIVIL LIBERTIES,

AND THE ADMINISTRATION OF JUSTICE

OF THE COMMITTEE ON THE JUDICIARY,

Washington, D.C.

The subcommittee met, pursuant to notice, at 9:10 a.m., in room 2226, Rayburn House Office Building, Hon. Robert W. Kastenmeier (chairman of the subcommittee) presiding.

Present: Representatives Kastenmeier, Danielson, Gudger, Railsback, Harris, and Sawyer

Also present: Bruce A. Lehman, chief counsel, and Thomas E. Mooney, associate counsel.

Mr. KASTENMEIER. The committee will come to order.

Today we are having the third day of hearings on the subject of copyright legislation. This morning we will focus on H.R. 997, which would provide for performance rights in sound recordings. I would like to call our two colleagues up first, Hon. Henry Waxman, and Hon. Henry Hyde, for testimony and perhaps introductions as they see fit. Mr. Waxman.

TESTIMONY OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA

Mr. WAXMAN. Thank you, Mr. Chairman. I wish to express my appreciation to you and the members of this subcommittee for convening these hearings on H.R. 997, the "Sound Recording Performance Rights Amendment." It is my hope that the record from these hearings will lead you to conclude that this measure should be reported to the full committee, and the entire House in the near future.

Many of us have worked hard to demonstrate broad-based support for this bill. That there are nearly 50 cosponsors from all political persuasions reflects the growing recognition that this legislation deserves enactment.

This bill is benefited as well from the endorsements of so many including: The Register of Copyrights, Department of Commerce, AFL-CIO, American Federation of Musicians, Recording Industry Association of America, Screen Actors Guild, American Federation of Television and Radio Artists, National Endowment for the Arts, American Bar Association, Consumer Federation of America, American Council for the Arts, and National Citizens Communication Lobby.

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